Betting has been around for thousands of years and computer systems that enable betting have been around for decades. However, people have not appreciated the use of bets for the purpose of communicating. Previous computer systems for handling bets have not allowed the efficient use of bets as communications tools.
The invention disclosed is therefore novel. It is a computer system that enables the easy use of bets for the purpose of communicating. For example, it cuts out the "house" and allows people to bet directly with each other. But, here is not the place to summarize the invention. The main point is that it approaches bets differently than they have been in the past. The essay below explains the point of view that the invention exploits. After the introductory essay (which will eventually be seen in a similar form in a publication called Bet Press), we will go into the description.
Major Invention Unappreciated
Most people think of betting as either a form of entertainment or as a vice, something mostly associated with games like football, cards and dice. Nothing especially important, except in that it might pose a threat to some people. History has shown though that there is a lot more to betting on games than meets the eye. It was the study of a dice game bet that led to the discovery of mathematical probability, a branch of math that has become a central part of science, technology and the way we look at the world.
It is remarkable that a science which began with the consideration of games of chance should have become the most important object of human knowledge.
Pierre Simon de LaPlace, Theorie Analytique des Probabilites PA1 a. A bet statement that can be found true or false. PA1 b. A probability statement (ratio), called the pay-off odds, that tells the proportions of how much the person betting on True has to risk compared to how much the person betting on False has to risk. PA1 c. The amounts of money (or other commodity) each party has at risk. PA1 d. The sides of the bet that each party picks, such that if the bet statement is true, the person who picked True wins and vice versa if the statement is false.
Amazingly, though gambling had been practiced for around 4,000 years, probability was overlooked mathematically until 1654. It was then that a French diceplayer and man-of-the-court, Antoine Gombauld, the Chevalier de Mere, asked Blaise Pascal what the proper bet was in a popular game of dice. Pascal examined Gombauld's question and wrote Pierre de Fermat about it. In a series of letters, Pascal and Fermat analyzed this question and related ones, and in so doing laid the foundations of the mathematics of probability. (About a hundred years before, Girolamo Cardano covered some of the same ground but his work, Book of Dice Games, was not published until 1663.)
Thus the analysis of dice bets revealed general principles of uncertainty--the laws of probability--that apply to much of our thinking about the real world. How could so much be found in such a trivial pursuit as betting on dice? Well, what applies to "trivial" examples can sometimes apply to a very broad range of things. For example, the law of gravity that applied to Newton's apple also applies to the moon and to all matter, as far as we know. In a similar way, what applies to thinking about dice bets also applies to thinking about a very broad range of things. And consequently, the laws mathematical probability have been developed into an extremely useful set of tools. They have been used to construct many disciplines: statistics, risk analysis, and information theory, to name a few.
Betting itself however was left to the gamblers, essentially unused. Though the math of it was worked out in detail, the activity was still considered a vice, dangerous enough to be outlawed for the most part. And that is ironic, for there was still a lot more to this vice than met the eye.
How so? Well, vice type bets share with all bets the same basic set of rules. These rules create a general contest, the bet, that tests the accuracy of people's thinking about uncertainty. More precisely, the bet tests the accuracy of people's probability estimates. The contest can be used to test estimates concerning dice games, card games, horse races and other "trivial" pursuits. But it can also test the accuracy of probability estimates concerning a very broad range of subjects. Indeed, the bet, like the laws of probability, can be used in many fields.
The Rules of the Bet
No one has ever given a crisp definition of the term "bet" and no one will. It is a word that has come to cover so many activities that we can no longer restrict it to certain well defined situations that everyone agrees upon. In this application, we will define a bet as what people think of usually, while realizing that this definition will not cover all possible types of bets. In a this application a bet is an agreement between two people who agree on:
A Fundamental Form of Expression
This agreement is a form of expression. That can be seen in the rules above where the whole point is to make probability statements and then back them up with money. It can also be seen in the well known phrase, "Put your money where your mouth is," which in the case of a bet means something along the lines of, "If you really believe what you're saying, you will take the chance of losing money if you are wrong in exchange for the chance of making money if you are fight."
In fact, the bet is a unique and fundamental form of expression in which people express probability estimates. What makes this type of speech special is that certain kinds of faking are forbidden and others are penalized. In a bet, a person cannot fake knowledge with vagueness, for vagueness is not allowed. And in a bet, a person believes he will be penalized, on average, for giving an overly optimistic estimate of his chance of winning. And in a bet where he sets the odds but lets the other person pick the side, he believes he cannot give and overly optimistic or pessimistic estimate of either side winning, just his best estimate. Here is not the place to go into details but an example will demonstrate. Assume UCLA and Kentucky are two college basketball teams that most bettors agree are evenly matched. And assume that some Senator is a big fan of his old college team, UCLA. And finally, assume he says, "UCLA is ten times better than Kentucky. We're going to blow Kentucky out this Sunday."
And so a skeptical constituent says, "You wanna bet, Mr. Senator?. Please lay some odds on Sunday's game." Notice that vague statements such as "ten times better" and "blow out" are forbidden in a bet. They become a statement that can be found true or false, ("UCLA will beat Kentucky this Sunday") along with a probability statement as to whether the statement is true.
We presume that the Senator in reality thinks that the teams are evenly matched and further that he does not want to lose money. If he sets odds of UCLA above 50%, he believes that he will lose money, on average. Therefore, the bet forces him to set the odds at 50% (or less). In other words, the bet forces him to admit that UCLA is no better than Kentucky.
What if he tries to be falsely pessimistic for the sake of money and claim that UCLA is worse than Kentucky? In this case, he would set the odds of UCLA winning at less than 50% and he would want to bet on UCLA. He would be getting the odds of an underdog even though the teams would be evenly matched. Well in this case the constituent can say, "You set the odds, Mr. Senator, but I'll pick the side." Now the Senator is stuck. If he unreasonably favors either team, the constituent will pick the profitable side.
The moral of the story is that a person who wants to win money in a bet cannot make a falsely optimistic probability statement that the side he is betting on will win. And if he lets the other person pick the side of the bet, he cannot be falsely optimistic about either side winning; the odds must be his best estimate of the chances each side has of winning.
Contest for Pitting Estimates
The bet is more than a contest that penalizes overly optimistic probability statements though, it is the general contest that allows two people to pit their probability estimates in a fair way. In a bet, the estimates are usually not out in the open but are indicated by the side of the bet that each person chooses. The person who has the better estimate will, on average, win money (or whatever is being risked in the bet). Therefore, a person engaging in a bet cannot fake that he knows more than his opponent about the statement being bet on.
This contest would be just an interesting game except that good probability estimates are a fundamental, though usually hidden, part of useful knowledge. By extension they are a fundamental part of reliable communication and good decision making as well. Because the bet can make people more honest about probability estimates, and because, over the long run, it gives a concrete measure of the accuracy of people's estimates, it is far more than an entertainment device; it is a profound invention.
A New Communications Medium
For people to be able to engage in this contest most efficiently, a new medium is needed. Executing bets requires more than just putting them in print. The full execution involves storing statements, setting terms, committing money, getting acceptance of the terms, deciding whether the statements are true, transferring money, settling disputes if necessary, and more. A medium is needed not only to execute bet but to record results, tally winnings and losses, transfer funds, stores and display bets along with other statements supported by bets.
Moreover, when used for communication, bets would usually support an ordinary statement: an article, a report, an ad, an editorial, etc.. The bets would support certain points in these conventional statements. And so, the new medium should allow users to also enter conventional statements and link those statements to the supporting bets.
Legal?
Whether cash bets are banned or not, people will still be able to make bets because people can bet points. These can be called Credibility Points (CP's). These are unquestionably legal to bet because they are free. They do not replace money because they are non-transferable. Money remains indispensable in many betting situations because it gives a unique incentive to win. Still, CP's can serve equally well in other situations and have the advantage of allowing anyone to bet regardless of financial situation. And so, this new medium would allow people to bet cash (if legal) and/or CP's.
Uses and Consequences
What are the possible uses and consequences of enabling people to bet routinely on all kinds of matters? That's hard to say. To see why, consider the printing press. It improved one of our basic activities, communicating, which means that the printing press has had far too many uses and consequences to summarize or even understand. While it's ridiculous to say that Bet Press and the Bet Central will have a comparable impact, the point is that they can have large and diverse effects because bets can improve several basic activities. How so? Well, bets can force people to be honest about what they know. That can improve communicating, discovering, thinking, deciding and doing.